The government drive to boost efficiency in public spending could be undermining Britain smaller manufacturing firms, MPs have said.

A report from the Commons trade and industry committee said that centralised procurement could make it harder for small and medium-sized firms (SMEs) to win contracts.

Committee chairman Peter Luff warned of "a danger that SMEs will be squeezed out from even tendering for contracts because of the centralisation imposed under the government's efficiency drive".

"The bureaucracy around tendering runs the risk of reducing competition for contracts in future," he said.

"In addition, too often purchasers see 'cheapest cost' as being the same as 'best value for money', and they fail to use the discretion already given to them to promote innovation or to achieve  environmental or social aims through public procurement."

Thursday's report expressed concern about the centralising of procurement, bundling tenders and moves to ensure economies of scale.

This could "conflict with the government's aim of increasing SMEs' access to public procurement contracts".

However the MPs also accepted that there was no simple way of ensuring that procurement systems encouraged the widest possible participation.

The committee noted that in almost every case "any recommendation for changes to procurement practice made by one of our witnesses was opposed by another".

"Procedures designed to increase efficiency were seen as harming SMEs; attempts to make contracts more accessible to SMEs as slowing down procurement or increasing costs; social clauses and environmental aims as adding bureaucracy; attempts to promote innovation as increasing complexity for the officials who make procurement decisions, or giving 'insider' companies advantages over their competitors," said the report.

"There is clearly a limit to what can be achieved through across-the-board changes to procedures.

"The focus must be on the way individual decisions are taken."